Big changes could follow WTO ruling

An ongoing feud with Brazil and five other cotton-producing African nations could have monumental consequences not only for U.S. farmers, but also for intellectual property rights — patents — held by U.S. companies.

Then again, it may not. It all depends on how the Brazilians and their African allies choose to play their next hand.

The flashpoint in this dispute is cotton, specifically how American policymakers have chosen to support the U.S. cotton industry over the past few years. The Brazilians maintain these supports — specifically counter-cyclical payments and loan deficiency payments — are illegal under World Trade Organization policies.

These types of support, they maintain, have had the effect of lowering the price of cotton worldwide, benefiting American farmers at the expense of farmers in developing countries such as Brazil.

For their part, American policymakers and trade negotiators have maintained that all the fuss largely is a moot point.

At Auburn University, Robert Goodman, an Alabama Cooperative Extension System economist and associate professor of agricultural economics, says the whole issue is laced with a considerable bit of irony.

“This is coming at a time when there will be no loan deficiency payment for cotton, even if that program continues,” says Goodman, adding that cotton prices are likely to remain high enough over the foreseeable future to preclude the need for loan deficiency payments.

“These payments are not going to be made this year, next year — who knows when?” he says.

Also, while farmers continue to receive counter-cycical payments for cotton, these payments no longer are tied to production and haven't been since the early 1990s.

“The farmers don't have to produce the cotton to receive the payments,” Goodman says.

Unfortunately for American farmers, the World Trade Organization has denied a U.S. appeal.

The denial is considered a major victory for the cotton industries in Brazil and West Africa.

“We can appeal again, and we probably will,” Goodman says.

But therein lies the biggest challenge of all. This latest ruling conceivably leaves the door open for Brazil and its African allies to retaliate by targeting U.S. trademarks, patents and commercial services. And under current WTO policies they would have the legal right to do so.

“In other words, they can take, scot-free, the value of several billion dollars of patents away from U.S. companies that operate in those countries,” Goodman says.

The strategy could prove especially troublesome for Monsanto, the world's premiere developer of transgenic crops, which previously has worked out an agreement with Brazil to honor the intellectual property rights of products such as transgenic cotton and soybeans, which are grown widely in Brazil.

“Brazil conceivably could use this ruling to set themselves up in the transgenic business, taking these genes, breeding them into new lines and marketing them around the world,” Goodman says.

Software developers and other companies dealing with intellectual properties also could suffer severely as a result of the ruling, he says.

For farmers, the effect of the ruling also could be far-reaching. As a general rule, the contours of farm legislation have been eked out slowly over a long succession of farm bills. However, pressure from the American corporate sector following the WTO ruling could lead to sweeping changes in the farm bill currently being drafted by Congress.

“Farmers may be forced into rapid and radical change as a result of this,” Goodman says.